Lithuania

.

BACK - COUNTRIES

How to set up company in Lithuania - accounting lithuania by Novasigma

ABOUT LITHUANIA

Lithuania at a Glance

Lithuania, the geographical center of Europe and part of Northern Europe, is located close to the three huge markets: Western Europe, Scandinavia, Russia and CIS region. The country has common borders with Latvia, Belarus, Poland and the Kaliningrad region of the Russian Federation. A number of non-stop flights from Europe make Lithuania easy to access. Lithuania was ranked 16 of 190 countries in Doing Business 2018 report (by World Bank). In Paying Taxes category, it is 1st in all Europe and Central Asia. Lithuania also offers a unique combination of modern infrastructure, highly educated and skilled talent, openness to innovation, and connections to the rest of Europe.

 

Population: 2 800 667
Form of government: Unitary semi-presidential republic
Official & spoken languages: Lithuanian
Currency: Euro
Time zone: EET  CEST (UTC+2) Summer EEST(UTC+3)
GDP (PPP): $96 261 billion
GDP (PPP)/per capita: $34,596
Average salary: 665 euro
Unemployment: 7,3 %
Major trading partners: Germany, France, Russia, Latvia, Poland

 

 

PLEASE CONTACT US TO SCHEDULE A MEETING WITH THE NOVASIGMA CONSULTANT

Doing Business in Lithuania

Advantages of doing business in Lithuania

Lithuanian business registration rules are liberal, registration requires only: 

  • One shareholder of any nationality
  • One director of any nationality
  • A paid-up share capital of EUR 2500

Lithuania an attractive jurisdiction for doing business because:

  • Lithuania is the perfect logistics gateway between Russia and EU.
  • Labor costs and secondary costs, such as office space are among the lowest in Europe.
  • Lithuania’s corporate tax rate of 15% is one of the lowest in the EU. Furthermore, a 6-year tax holiday is available to companies established in Lithuanian Free Economic Zones, with a reduced tax rate of 7.5% applying for the subsequent 10 years.
  • Lithuania has signed double taxation avoidance agreements with 50 countries, Including Canada, China, Austria and the United Kingdom.
  • Lithuania joined the European currency union on January 2015 and the national currency is now the Euro. This removes the currency exchange risk, when trading with other Eurozone countries, thereby reducing barriers to trade an increasing the attractiveness of registering a company in Lithuania.

 

 Disadvantages of doing business in Lithuania

  • The Value Added Tax (VAT) in Lithuania is 21%, reducing the attractiveness of products sold in the country compared to other Eastern European economies. 
  • Only 30% of Lithuanians speak English. It is difficult for foreign entrepreneurs to grow their business in Lithuania, as communication is limited. 
  • The total cost of company registration is increased by the requirement that all company documents are translated into Lithuanian before filing with the companies registry.
  • Lithuania is almost completely land locked, limiting trading by sea.

PLEASE CONTACT US TO SCHEDULE A MEETING WITH THE NOVASIGMA CONSULTANT

The World Bank “Ease of doing Business -ranking”

Overall rank 2018: rank 16
– Starting a business: rank 27
– Dealing with construction permits: rank 12
– Getting electricity: rank 33
– Registering property: rank 3
– Getting credit: rank 42
– Protecting minority investors: rank 43
– Paying taxes: rank 18
– Trading across borders rank 19
– Enforcing contract: rank 4
– Resolving Insolvency: rank 70

READ MORE: LITHUANIA COMPANY FORMATION SERVICES & FEES

Residency and Moving to Lithuania

Tax Resident in Lithuania

TAX RESIDENCY – INDIVIDUALS:

  • Tax Resident of Lithuania is individual who’s permanent place of residence during the tax period is in Lithuania.
  • Tax Resident of Lithuania is individual who’s personal, social or economic interests during the tax period are in Lithuania, rather than abroad.
  • Tax Resident of Lithuania is individual who is present in Lithuania for at least 183 days during the tax period.
  • Tax Resident of Lithuania is individual who is is present in Lithuania for at least 280 days during two consecutive tax periods and has stayed in Lithuania for at least 90 days in either of
    the tax periods.

TAX RESIDENCY – BUSINESS:

  • Tax Residents of Lithuania is business that is incorporated in Lithuania.
  • Lithuanian entities are subject to tax on their worldwide income minus the income of their permanent establishments (PEs), provided the PEs are based in European Economic Area (EEA) countries or countries that have concluded a tax treaty with Lithuania and the income from activities carried out through the PEs is subject to corporate income tax (or equivalent tax) in those countries.
  • Corporate income tax is imposed on a company’s profits, which consist of business/trading income, passive income, capital gains and positive income of a Lithuanian entity’s controlled foreign entity, or part of such income. Normal business expenses may be deducted in computing taxable income.

 

Taxation in Lithuania

Taxes in Lithuania

Residence: Tax Residents of Lithuania is business that is incorporated in Lithuania.

Basis: Lithuanian entities are subject to tax on their worldwide income minus the income of their permanent establishments (PEs), provided the PEs are based in European Economic Area (EEA) countries or countries that have concluded a tax treaty with Lithuania and the income from activities carried out through the PEs is subject to corporate income tax (or equivalent tax) in those countries.

Taxable income: Corporate income tax is imposed on a company’s profits, which consist of business/trading income, passive income, capital gains and positive income of a Lithuanian entity’s controlled foreign entity, or part of such income. Normal business expenses may be deducted in computing taxable income.

Taxation of dividends: Dividends are taxable at a rate of 15%, unless the participation exemption applies in  accordance with which dividends are exempt from corporate income tax if a parent company holds at least 10% of the shares of the subsidiary for at least 12 months. Dividends received from a foreign entity registered in an EEA member state and whose profits are subject to corporate income tax or an equivalent tax are exempt from tax. Dividends received from a foreign entity registered in a state other than an EEA member state may also be tax exempt if the Lithuanian company holds at least 10% of the shares of the subsidiary for at least 12 months, the foreign entity’s profits are subject to corporate income tax or an equivalent tax and the foreign entity is not registered in a blacklisted territory.

Capital gains: Capital gains of resident and nonresident companies are taxed as general taxable income, at a rate of 15%. An exemption may apply to capital gains derived by a Lithuanian resident holding company or PE of a foreign company on the disposition of shares in a company (that is subject to corporate income tax) located in Lithuania, another EU/EEA member state or a country that has concluded a tax treaty with Lithuania. To qualify for the exemption, the Lithuanian company or PE must hold more than 10% of the voting rights for an uninterrupted period of at least two years. In the case of a reorganization, the exemption applies if a company or PE has held more than 10% of the voting rights for an uninterrupted period of at least three years.

Losses: Operating losses may be carried forward indefinitely if the entity continues to carry on the activity that resulted in the losses. However, losses carried forward cannot offset more than 70% of taxable income of the entity in any tax period, except for micro companies. Losses incurred on the sale of shares may be carried forward for five consecutive tax periods and may be offset only against income from the sale of shares. Losses may be transferred within a group of companies if certain criteria are met. The carryback of losses is not permitted.

Foreign tax credit: Foreign tax paid may be credited against Lithuanian tax on the same profits, but the credit is limited to the amount of Lithuanian tax payable on the foreign income. Foreign tax paid on income earned through a Lithuanian company’s PE located in an EEA member state or a country that has concluded a tax treaty with Lithuania may not be credited against Lithuanian tax.

Participation exemption: Dividends are exempt from corporate income tax if the parent company holds at least 10% of the shares of the subsidiary for at least 12 months.

 

Taxable income: 15%
Taxation of dividends: 15%
VAT registration:
Registration is compulsory for Lithuanian businesses whose annual turnover exceeds EUR 45,000, but voluntary registration also is possible.
– VAT Rates: The standard rate of VAT is 21%. 
Surtax: No
Alternative minimum tax: No
Withholding tax (general): 15%
– From Dividends 15%
– From Royalties 10%
– From Interests
There is no withholding tax on interest paid to EEA-resident companies and companies resident in countries that have concluded a tax treaty with Lithuania. Otherwise, the rate is 10%.
Transfer tax: No
Capital gains tax: Capital gains are taxable at a rate of 15%
Real property tax:
Real property (with certain exceptions) owned by a legal person; real property used by a legal person under an installment sale or lease contract or financial lease providing for the transfer of ownership; or real property owned by an individual and transferred to a legal person for an indefinite period or a period exceeding one month, is subject to real property tax. Depending on the municipality, the rate varies from 0.3% to 3% of the value of the property. The type of property will determine the applicable valuation method and, therefore, the taxable amount.
Social security:
The employer must withhold a 3% pension social insurance (plus an additional 2% for resident individuals participating in the second pillar pension funds program) and a 6% health insurance contribution on behalf of its employees from employment- related income, and pay the employer’s part of social security contributions at a rate between 30.98% and 32.6%, depending on the insurer’s risk group.
Payroll tax: No
Stamp duty:
No, although a notary fee may apply to certain transactions
Capital duty: No
Tax treaties:
Lithuania has concluded 53 tax treaties. Lithuania signed the OECD multilateral instrument on 7 June 2017.
Anti-avoidance rules:
– Transfer pricing
The transfer pricing rules are based on the OECD transfer pricing guidelines. Companies must document transfer prices if the annual turnover exceeds EUR 2,896,200 (this threshold does not apply to financial and credit institutions or insurance companies).
– Thin capitalization rule
Thin capitalization restrictions apply to interest paid to controlling entities. A creditor qualifies as a controlling entity if it owns more than 50% of the shares in the company paying the interest (or more than 50% of the shares are owned together with associated persons and the creditor’s “own” holding is 10% or more). A group company also qualifies as a controlling entity. A debt-to-equity ratio of 4:1 applies, and any interest attributable to the debt in excess of this ratio is nondeductible. The thin capitalization restrictions do not apply if the paying entity can demonstrate that the same loan would have been granted under the same circumstances by an unrelated party. No thin capitalization restrictions apply to financial institutions rendering financial lease services.
– Disclosure requirements No

Compliance for corporation:

Tax year: Calendar year.  However, at the request of the taxpayer and taking into account the characteristics of the taxpayer’s activities, the tax authorities may set a 12-month tax period other than a calendar year.

Consolidated returns: Consolidated returns are not permitted; each company must file separate return.

Filling requirements: Companies are required to file an annual corporate income tax return and advance corporate income tax returns (if the income for the previous tax year exceeded EUR 300,000). The annual corporate income tax return must be submitted and the corporate income tax must be paid by the 15th day of the sixth month of the following tax period, i.e. by 15 June of the following tax year for calendar year taxpayers. If the company’s income for the previous tax period exceeded EUR 300,000, the company also is required to make advance payments no later than the 15th day of the last  month of each quarter of the tax period, of at least one- fourth of the total annual corporate income tax calculated according to the rules specified in the Law on Corporate Income Tax.

Penalties: Penalties equal to 10%-50% of the tax liability may be imposed; the amount depends on the type of violation, whether the taxpayer cooperates with the tax authorities and other circumstances the authorities deem relevant. A daily late penalty of 0.03% applies to late tax payments.

Rulings: A taxpayer can request a binding ruling or advance pricing agreement on future transactions.

Tax authorities: 

Personal Taxation in Lithuania 2018

Personal taxation basis: 

Lithuanian tax residents are subject to tax on their worldwide income; nonresidents are subject to tax only on income sourced in Lithuania and on income derived from activities through a fixed base in Lithuania, including foreign-source income attributed to that fixed base.

Tax Residence:

An individual is resident if he/she is in Lithuania for 183 days or more in a calendar year or if his/her principle place of residence or the center of economic interests is in Lithuania. 

Filling status:

Joint returns are not permitted.

Income tax rates in Lithuania:

Taxable income includes employment income, income from commercial activities, royalties, income from the lease of assets and all other personal income.

Social security payments in Lithuania:

The standard rate of social security contributions is 40.18%, from which 31.18% is employer’s part and 9% is employee part. Additionally 2% is withheld from the gross employment income of an employee participating in certain pension accumulation plans.

Inheritance/estate tax in Lithuania:

Taxable property includes movable assets that have to be legally registered and immovable assets located in the Republic of Lithuania, shares and money.

Tax is not levied on the property inherited from close relatives or when the value of the inherited property does not exceed EUR 3,000.

The rates of inheritance tax are as follows:

  • 5% on inherited property, if the taxable value does not exceed EUR 150,000,
  • 10% on inherited property, if the taxable value exceeds EUR 150,000.

Net wealth/net worth tax in Lithuania:

No

Tax year:

Calendar year

PLEASE CONTACT US TO SCHEDULE A MEETING WITH THE NOVASIGMA CONSULTANT

 

OUR OFFERS IN LITHUANIA

  • business planning, tax consulting by Novasigma
    BUSINESS CONSULTING FROM 125€/h
  • TAX PLANNING FOR PRIVATE PERSONS FROM 850€
  • TAX CONSULTING FOR CORPORATIONS FROM 2.490€

 

NOVASIGMA IN LITHUANIA

Consulting & Advisory services

Consulting & Advisory services | Ask for quotation

  • Due diligence process
  • Foreign Market entry & Supplier search
  • Business Plans & Descriptions
  • Development & Capital Advisory
  • International Tax Planning
  • Funding & Investor Search
  • Taxation in Lithuania
  • Business Restructuring via Offshore entities
  • Exit Strategy & IPO
  • Problem solving in Belgium by Novasigma Accounting & Law partner offices

PLEASE CONTACT US TO SCHEDULE A MEETING WITH THE NOVASIGMA CONSULTANT

Incorporation, Administration & Business services in Lithuania

Incorporation services in Lithuania

  • New company formations in Lihtuania | from 1.100€
  • Company Closures and liquidations in Lithuania | Ask for quotation

Company administration in Lithuania

  • Legal registration address service for a Lithuanian company | from 120€/year
  • Company secretarial service | 60€/h
  • Nominee director services | from 600€/year
  • Nominee shareholder/ techical UBO services | from 250€/month

PLEASE CONTACT US TO SCHEDULE A MEETING WITH THE NOVASIGMA CONSULTANT

Additional business services in Lithuania (by Novasigma Certified Partners)

Accounting and Bookkeeping services in Lithuania


Some of the common domestic Accounting and Bookkeeping services we provide in Lithuania include

  • Bookkeeping and Accounting Package from 600€/year
    • Invoicing and payments
    • Annual accounts
    • Monthly Reconciliation
    • Monthly financial statements (including balance sheet and income statement)
    • Payroll services
    • Income and tax return
  • Management accounts | Ask for quotation

Value Added Tax (VAT)

  • VAT registration | +250€
  • EORI registration | +250€
  • Advice on VAT scheme options | Ask for quotation
  • VAT returns and declarations | 59€/h

Audit

  • Annual accounts in view of an annual audit and attend accounting audits | Ask for quotation

Legal services for Lithuania companies and business owners

Legal services in Lithuania for all Novasigma Clients including companies and their owners and directors

Novasigma has built in Lithuanian team of lawyers, associates and legal advisers to assist our clients with a business and tax planning, overseas business operations, risk management and other legal matters. Primarily focused on business transactions, Novasigma Accounting & Law corporate attorneys are a great asset to a small and large businesses. With a background on corporate law, our corporate lawyers and legal advisers have an in depth knowledge on the transactions that may put your business at risk of litigation. These include contracts and negotiations, taxation laws, business structuring, buy/sell agreements, and intellectual property, among others.

Send us a Brief for Quotation

Banking, Financial and Insurance services in Lithuania

Banking services in Lithuania

  • Business bank accounts
  • Personal bank account opening for business owners
  • Payment service providers
  • Investment solutions
  • Alternative banking solutions

Financial services in Lithuania Ask for quotation

  • Debt collection services
  • Invoice funding & cash flow solutions
  • Factoring
  • Leasing
  • Wealth management


 

NEWS AND BUSINESS OPPORTUNITIES IN LITHUANIA

  • TOP 50 Countries to Move for Young Up-Coming Self-Made Millionaires
  • Use an Offshore Company for Cryptocurrency Tax Benefits

 


Interested in Lithuania? Please leave us a message and we will come back to you shortly.

BACK - COUNTRIES

Novasigma provides international accounting services, company formation services, legal, business and tax advisory services | Terms of Use & Terms of Business | © 2016 NOVASIGMA Global - Accounting & Law Cooperative ("NOVASIGMA LIMITED"). Member firms of the NOVASIGMA Global - Accounting & Law network of independent firms are affiliated with NOVASIGMA Global - Accounting & Law. NOVASIGMA Global - Accounting & Law provides no client services. No member firm has any authority to obligate or bind NOVASIGMA Global - Accounting & Law or any other member firm vis-à-vis third parties, nor does NOVASIGMA Global - Accounting & Law have any such authority to obligate or bind any member firm. Independent registered advisers, lawyers and accountants are not owned by, affiliated with or supervised by Novasigma or its affiliates. Novasigma provides custody, trading and operational support services for advisers, lawyers and accountants. Not all products and services available through Novasigma and its affiliates are available through advisers, lawyers or accountants. Registration does not imply a certain level of skill or training. Depending on jurisdiction there might be eligibility requirements to work with a dedicated Financial Consultant, Lawyer or Accountant. Wealth management, accounting, audit and legal services refers to products and services available through the operating subsidiaries of the Novasigma Corporation of which there are important differences including, nut not limited to, the type of advice and assistance provided, fees charged, and the rights and obligations of the parties. It is important to understand the differences when determining which product and/or services to select. Novasigma provides a full range of business, financial, banking and tax advisory, accounting and legal services through its operating subsidiaries.

All rights reserved. NOVASIGMA is a trademark of SilverFox & Co. Inc. Online services by NOVASIGMA LIMITED - Suites 41/42, Victoria House 26 Main Street, Gibraltar GX11 1AA.

bitpay
Bitpay
Latvijas Pasta Bank
NTL Immigration
CM Asesores
Blue Orange Bank